Factor/Style Investing
Factor Premia and Factor Timing: A Century of Evidence
July 2, 2019
We examine four prominent factor premia – value, momentum, carry, and defensive – over a century from six asset classes. The results offer support for time-varying risk premia models with important implications for theory seeking to explain the sources of factor returns.
Fixed Income
Looking Under the Hood of Active Credit Managers
July 1, 2019
We find that credit long/short managers tend to have high passive exposure to the credit risk premium. In contrast, we find that high-yield-focused long-only managers provide less exposure to the credit risk premium than their respective benchmarks.
Tax Aware
Should Taxable Investors Shun Dividends?
June 13, 2019
We evaluate the tax benefit of dividend avoidance for quantitative multi-style strategies and find that dividend avoidance generally reduces implementation efficiency, thus lowering expected pre-tax returns.
Machine Learning
Autoencoder Asset Pricing Models
May 22, 2019
We propose a new latent factor conditional asset pricing model, which delivers out-of-sample pricing errors that are far smaller (and generally insignificant) compared to other leading factor models.
ESG Investing
Hedging Climate Change News
May 22, 2019
We propose and implement a procedure to dynamically hedge climate change risk and discuss multiple directions for future research on financial approaches to managing climate risk.
Fixed Income
Give Credit Where Credit Is Due: What Explains Corporate Bond Returns?
May 17, 2019
We examine the risk and returns of U.S. corporate bond indices using a set of economically-motivated factors and find that options markets explain a great deal of credit returns.
Alternative Investing
Trends Everywhere
May 15, 2019
We provide new out-of-sample evidence on trend-following investing by studying its performance for 82 securities not previously examined and 16 long-short equity factors.
Factor/Style Investing
Factor Momentum Everywhere
January 29, 2019
Can individual factors be reliably timed based on their recent performance? This study of 65 widely-studied, characteristic-based equity factors aims to find out.
Equities
Forecasting the Distribution of Option Returns
December 12, 2018
We propose a method for constructing conditional option return distributions.
Market Risk and Efficiency
A Framework for Identifying Accounting Characteristics for Asset Pricing Models, with an Evaluation of Book-to-Price
November 7, 2018
We provide a framework for identifying accounting numbers that indicate risk and expected return.